OPEC: A Texan Idea Twice Thought In Venezuela

I grew up among oil geologists and drilling engineers in various oil fields West of the Maracaibo Lake Basin and, later on, in oil-rich Eastern Venezuela.

One day in 1966—I was barely 15—I went into the camp's chief geologist's house trailer. This particular camp was in the borders of the Orinoco River delta, a remote tropical region of flooded savannas. My parents were very fond of this young American geologist who has just got transferred to Nigeria. So my dad sent me to help him carry his personal belongings into the company's jeep that would take him to a small airstrip some 7 miles away.

Behind his desk hung a framed yellowish sheet of paper with a long typewritten quote on it. You had to come near and look up close to read it. It appeared to be some passage of a book but, to this date, I could not tell for sure where it came from. It read:

If I were a barrel of oil, comfortably located in a pool, hidden in a trap deep in the ground, the region that would be safest for me—where I might live out another 50 or 100 million years in peace and dignity—would be in some country where minerals and exploration are nationalized. The reason is that in counties such as these, there is but one hunter, and the chances of eluding him are far better than the chances of being discovered. The most dangerous place for me to live in, as a barrel of oil, would be in the United States where there are thousands of hunters and each has a different weapon.—A. I. Levorsen

As we came out of the trailer, I told him not to forget the framed quote. He then said that it wasn't his; it already hung on the wall when he arrived in the camp some 18 months earlier. His predecessor—he guessed—must have left it behind. He noticed how interested I had become in the framed quote and said, "You can keep it if you want it."

Indeed, that framed long paragraph had an enigmatic air about it that appealed to my curiosity about how Venezuela, a malaria-plagued tropical country that during that last quarter of the 19th century competed with Colombia and Costa Rica as major coffee-exporting countries, had became a major oil-exporting country with practically no export-oriented coffee plantations now to be found. And no malaria, either. I hung Mr. Levorsen's framed quote on one of my room's walls, still wondering who he might be.

Arville Irving Levorsen (1894-1965), I came to know, was a brilliant American oil geologist who in 1964 projected with amazing accuracy what the U.S. oil demand would be by 2000. He also was the first Dean of the Stanford School of Mineral Sciences (now Earth Sciences). Mr. Levorsen was revered by every surface geologist I met in Venezuela at the time. His framed quotation is in the very origin of my life-long interest, as a playwright and fiction writer, in my country's petroleum economic history.

Roland Barthes, the late French structuralist thinker, asserts in one essay on historical narratives that one of the main tropes of history writing—what he calls "the objective voice"—often "turns out to be a particular form of fiction." I can't tell if he was right—I am just a fiction writer—but there is one thing of which I am sure after all this years: there is almost nothing worth being called "objective" in what passes to be petroleum history in Venezuela. The prevailing views on how Venezuela became an oil producing country are very unfortunate, to say the least.

Most of them show a misleading anti-American bias and, time and again, resort to Marxist tenets about "imperialism" and "neo-colonial oil enclaves", thus skewing the understanding of how disparate entities the American petroleum industry and, say, the State Department or the Pentagon can be.

This can be all the more deceptive as Marxism in Latin America has melted into the mainstream of academic progressive "sincretic cults". All sorts of of postmodern "narratives" shape most current Latin America's ideas about its own history. Take the story of how OPEC came about.

The official account of it—the one that is taught in elementary school—has it that Mr. Juan Pablo Pérez Alfonzo, a distinguished Venezuelan lawyer, is the "Father of OPEC". Pérez Alfonzo, a professor of civil law at the Universidad Central, had no training in geology or petroleum engineering. Nevertheless, during the 1940s and 50s, he became the unquestioned spokesman of Venezuela's nationalistic oil policies.

"An ascetic parsimonous man"—says Stephen G. Rabe in a penetrating moral portrait of Pérez Alfonzo—he deplored waste of any kind, including the too rapid depletion of Venezuela's natural resources. He constantly preached the gospel of frugality to his countrymen. By his own admission, he was a Calvinist in a land made spendthrift by the oil bonanza. Like other senior adecos [Venezuelan social-democrats], he endured ten years of exile, living for a time in Washington, D.C., after the fall [in 1948] of the [Rómulo] Gallegos government.

A decade of reflection has sharpened Pérez Alfonzo's views about the roles of his nation and oil in the world economy. In a time of oversupply and declining prices, he insisted that petroleum, the vital commodity of modern civilization, had an 'intrinsic' value above its market price and that it must be husbanded for future generations. His observations of U.S. life during his exile further persuaded him that industrial nations were recklessly wasting a precious resource."1

In 1959, after the dictator General Pérez Jiménez was ousted by a popular rebellion and a democratic government was elected, Pérez Alfonzo became Minister of Mines and Hydrocarbons. He aspired to control oil prices and put an oil producing country's cartel in place of the private cartel of multinational oil corporations. Early in 1960, Pérez Alfonzo and Abdullah Tariki, the Saudi oil minister, met each other in Cairo. Pérez Alfonzo told him about his thoughts. By August that same year, OPEC was founded in Baghdad.

It is no doubt an uplifting story about a single-minded Third World citizen who takes on the great industrial customers of the raw-material producing countries. It is not altogether false, either. But they way it has usually circulated among us, in journalistic reviews, in secondary school history text-books and even in colleges, plays down—when it does not totally conceal—the fact that, while in exile in the United States, Pérez Alfonzo thoroughly studied the regulatory strategies developed by the Oil and Gas Division of the Texas Railroad Commission (TRC) during the 1920s. He developed great admiration for Mr. Clarence G. Gilmore, who was also a distinguished lawyer and once a Commissioner of the TRC.

"Petroleum conservation in Texas in the 1920s occurred within the larger context of business-government relations in the United States",2 says William R. Childs, a thorough scholar of regulation history in America. According to Professor Childs, the TRC is certainly a rara avis among U.S. regulatory agencies of all times in that it "worked cooperatively with industry executives, within a Progressive Era approach, to reconcile conflicts between prevailing legal doctrines and the economic structure of the industry; and that through a dual private-public management approach to rationalizing the industry, the regulators not only made headway in [resources] conservation but also legitimized the [regulatory] agency in the eyes of the industry leaders".3

Resource conservation and regulation policies both summarize Pérez Alfonzo's ideas on how Venezuela should draw wealth from its oil. There's something wondrous and unsettling in the way a militant nationalist like Pérez Alfonzo could elicit inspiration for his future political action from the legacy of Southern populist agitation against monopoly of the 1890s that gave origins to the TRC. OPEC could be viewed as an unintended consequence of regulation in mid-twentieth century's American capitalism.

The momentous global tendencies of the oil industry were thus to be fatefully opposed by a Latin American lawyer who, in time, did not shy away from studying a very especial moment of American economic history in order to build one of the most unavoidable forces of the global oil market.